Domestic air service development in the stagnant US market

Abstract

Over the past decade the US airline industry has transformed itself from a highly fragmented marketplace with excess capacity, redundant hubs and high operating costs into an oligopoly that practises capacity constraint to increase ticket prices while enjoying lower operating costs that resulted from the synergies realised through bankruptcies and airline consolidation. Now that the US airline industry has matured to the level on the product lifecycle where growth is virtually non-existent and competition between airlines has become more limited, the number one question US airports have is: how can airports ensure passenger traffic growth through successful development of new air service and the strengthening of existing air service? This paper provides an insight into how and why airlines make route-planning decisions and what airports can do to improve the appeal of their market to better attract airlines.